Corporate earnings set for bright second half

PETALING JAYA: Corporate Malaysia’s earnings outlook for the second half (2H) of 2026 remains positive, following a second- quarter (2Q26) performance that saw more companies beating profit expectations.

CGS International (CGSI) Research believes that the fuel price adjustments in June and July, coupled with an easing in input costs from their peaks in the March to May period, provide a tailwind for the results of public listed companies in 3Q26.

This is despite the fact that a flare-up in Middle East tensions is still a risk for companies faced with unsubsidised fuel costs.

“Additionally, the government’s decision to reinstate higher subsidised fuel quotas effective Sept 1, coupled with an election-friendly budget set to be tabled on Oct 9, should, in our view, see these tailwinds carry into 4Q26 as well,” it said.

As at Sept 3, CGSI Research analysts raised estimates on 11 stocks and reduced estimates on 16 stocks. With this change, the overall CGSI Research universe’s 2026 core net profit forecast growth is higher at 11.6% from 11.2% as at end-2Q26.

The research house expects core net profit growth of 11.5% in 2027 compared to 10.1% as at end-2Q26. Stocks with the biggest upward revisions in core net profit were construction and transport, with consumer and petrochemicals seeing the biggest downward revisions.

Another analyst told StarBiz that the sentiment on listed companies’ earnings for the 2H has generally improved, although this is subject to macro vulnerabilities in the upcoming quarters.

“Companies linked to data centre contracts and deals should continue to do well. Other sectors that are expected to do well in the 2H are plantation and utilities,” added the analyst.

Looking ahead, CGSI Research has maintained its constructive view on the Malaysian equity market with an unchanged end-2026 FBM KLCI target of 1,780 points. It also has a blue-sky target of 1,960 points, should general election risks be removed.

Commenting on corporate Malaysia’s 2Q26 earnings season, CGSI Research said the results were largely in line, with 53% of its Malaysia coverage meeting core net profit estimates and 18% beating expectations – up from 7% in 1Q26.

However, misses continued to increase from 27% to 29% in the same period, with the consumer and financial sectors providing the highest number of misses.

Overall, CGSI Research’s coverage universe delivered core net profit growth of 10.4% quarter-on-quarter (q-o-q) and 12% year-on-year (y-o-y), with 1H core net profit up 5.7% y-o-y – better reflecting the trends, given the shift in seasonality in 2026 from an earlier Hari Raya celebration in 1Q26.

Overall, the 1H core net profit stood at 48.8% of the research house’s 2026 estimates pre-results.

“The 2Q26 results carried evidence of the Middle East tensions, with higher logistics and selected input costs, including fuel, frequently touted by companies as having impacted their 2Q26 performance.”

In the banking sector, gross impaired loans (GIL) rose 10% q-o-q to RM1.26bil as some businesses faced pressures, but strong business loan growth in 2Q26 raised core net profit for the sector by 6% q-o-q and 4% y-o-y.

July banking statistics showed a sharp moderation in GIL and further new loan growth, reflecting the positive economic trends, with Malaysian gross domestic product growth up 6% y-o-y in 2Q26.